Scenario Planning

October 26, 2015

Companies that are facing industry disruptions are bad enough; during these times leadership faces the most important test – the ability to lead during a crisis. The need of foresight, change and organization design are what true leadership looks like. Some sees this an opportunity to gain power and fulfill their thirst for greed and this needs to be stopped. Because strategic leadership matters… whether through malice or naïveté, those who abuse or tolerate the abuse of leadership place companies at risk.

Poor leadership cripples businesses abilities to accept new realities, correct mistakes and make strategic bets. At lower levels in the hierarchy, the problem was even more severe because in decisions and lack of strategy. Seeing things for what they are. Strong crisis leaders live on the front end of reality and speak in future tense. They recognize systemic drivers and their significance and do not shy away from the consequences of what they see. Foresight and strategic intellectual integrity is a key component of crisis leadership; they think of what is best for the organization, not their own personal or political gain. Poor strategic leadership is often the results of the following:

THE FALLACY OF FORESIGHT

Poor leadership assumes that the climate will gradually improve and things will not get worse. They think the future is predictable and they have a good pulse of the market better than others. Often what they have is groupthink. The reality is things do get worse and they are still reacting to the shift rather than getting ahead of the shift. They could not connect all the variables that are shaping the future of the business and fail to calculate the unforeseen market, industry, technological, social, and behavioral shifts. The fallacy of prediction inevitably led to the downfall of many businesses.

Strategic foresight is often lacking to allow the companies think ahead of the curve. Strategy and detail with speed and clarity. They are able to see the big picture. They can see all of the moving parts and understand what is cause and what is effect. They get below the 30,000ft level and can dig deep into detail without being mired in it. They quickly develop a very detailed knowledge of the issues. This ability further enhances their capacity to view the problem realistically.

THE FALLACY OF SECRECY

Poor leadership believes it is better to shield middle and junior employees from the seriousness of the crisis and radiate a false sense of comfort hoping people won’t read what’s out there. The most common defensive speech usually include 1/ We still a very loyal customer base and they are very loyal to us 2/ We still have a lot of cash 3/ Our product is good and we need better marketing 4/ We are not aggressive enough in pricing. All wrong. Many of these can go away very quickly. Companies should connect their passion points to a foresight-based business strategy that are executable to secure their support and commitment.

THE FALLACY OF ORGANIZATION

Poor leadership usually based them on the notion that a new organization structure is important to formally show the transformation. Any formal organization redesign takes too much time to execute and slow down the transformation. This is the time where they should get rid of people’s title and organize as hubs and networks to executive their strategies. It needs to act as an attacker not a defender. Defender usually won’t survive. Leaders must be strong enough to hold themselves (and the board) accountable for the past transgressions of turning a blind eye from right and poor decisions or indecisions that led to the current state. Current problems are most likely the results of decisions that were made 24-36 months ago. Strong leaders take ownership of the problem and acknowledge that no magic can undo these poor decisions.

They understand, however, that a long-term solution requires the input and involvement of many stakeholders. They identify those individuals and work together towards a solution that everyone can support and can live with. They also need to differentiate from those who take advantage of the crisis by advancing their own agendas even at the expense of the organization. The successful crisis leader seeks out individuals who have a different and strategic perspective on an issue even whose advice may be contrary to that of their board.

Crisis is the time for real strategic leadership. It is the time to deliver bad news when they need to and do it in a way that avoids panic and provides a realistic level of hope for the future. Above all, they are courageous enough to make sharp decisions, act with speed and take carefully calculated risks.

July 03, 2015

During a bank robbery in China, the bank robbers dressed in fake Hugo Boss fashion, carrying AK47s shouted to everyone as they rushed into a bank: "Everyone don't move. This is a robbery. The money belongs to the People. Your life belongs to you. Your designer handbag we will not take. We don’t take your IDs and we are not identity thefts, that’s not ethical at all. We will take only the money from the bank."

This is called “Staying Focus!”

The older robbers shouted “Don’t do any tricks. I know them because I used to work in a bank too. Just do as you are told.” One guys asked. “Which bank did you work for?”. He replied “The Sperm Bank. But we never had a robbery while I worked there.”

This is called “Domain Knowledge!”

Everyone in the bank got down on the floor. One woman was looking at her smartphone and noticed one of the robbers showed up on her Tinder app and shouted hey you look good and is that a real picture! The younger robber said, “We are only here to do work, not looking for a date. Perhaps after. Now I am busy?" The big brother yelled at him ”You should have turned that off!” And then everyone in the bank started looking at their smartphones.

This is called "Avoiding Distraction!”

Then one of the bank’s staff started asking the robbers. “What are you going to do with that much money? You guys should know investment is risky if you don’t know anything about it. You don’t want to risks your hard earned cash. We have different investment vehicles and the money can be placed in Switzerland and safe even if you got caught.”

This is called “Risks Management!”

When the bank robbers returned home, the younger robber told the older robber: "Big brother, let's count how much money we got" The older robber said: "Don’t bother, the news will tell us. Too much work and let them do the job. I'd rather spend the time look at stocks we want to buy with the money. The market is a good buy now.” The young robber said “Ah yes! Let them do the job!”

This is called “Opportunity Cost!”

Right after the robbers were gone, the bank manager held a meeting. But the supervisor said to him: "Shall we add the $10m that we have lend to our friends and families so we can write them off! Perfect timing.”

This is called “Opportunity Mapping!”

The next day, the TV news reported that $100 million was taken from the bank. The robbers counted and counted and counted, but they could only count $10 million. The robbers were upset: "We risked our lives and only took $10 million. The bank manager took $90 million without doing anything. That’s not fair. I guess that’s what happened when people understand business”

This was adapted from a joke I was told when traveling in China and dramatized.

June 30, 2015

Let's try to paint a likely not-too-distant future. In this future, everything around us will be managed by algorithms. They manage and recommend what we want to watch; they control traffic of our driver-less cars; they control those drones which deliver our pizza; predict for you which one of your friends will become your future spouse, etc. They will make our life effortless and predict what things will happen next or what's best for us. We all wish that it is that simple.

As we are picking up massive data every second, algorithms are critical to how we make sense of them and our reliance on algorithms is growing by the second. But how much faith should we put into those algorithms, and how reliable they are depends on who you talk to. The accuracy of the algorithmic differentiation (automatic differentiation) is key in dealing with data volatility in many complex cases where accuracy of data is critical to the final outcome. I don’t know when we can have statistical evidence comparing how often driverless cars mistakes and how often human drivers make mistakes or how well a software program investing in stocks makes mistakes and human making investment mistakes.

We need to develop programs to check whether algorithms are working as they were intended and monitoring algorithms by the results they produce based on machine performance metrics. Vetting algorithms in advance isn't practical at all as many are too complex for their outcome to be predicted. Algorithmic differentiation is used to fine tune algorithms that are complex to optimize. We will be placing our faith into the accuracy of these algorithms and trusting that they will deliver. I think we may be over-optimistic and mining a lot of data using statistical analysis still has a very strong random component to it. To optimize these models we need algorithmic differentiation and sometimes it feels like a scientific random number generator. The more data we have, the more simulation is needed and the more reliance on the significance of data, and significance means sensitivities. We’re in the midst of a transformation when industries are exploring how to use big data to create new business models.

There’s one certain thing in big data, it’s that all algorithms are not created equal. The biggest question is how many jobs will disappear when algorithms take over human jobs? People ask the same question during the first industrial revolution when machines started making goods a lot faster and cheaper. Are we entering a world in which the algorithms themselves will be competing with humans? Honestly, I just don't like it when algorithms make decisions for us. They can help me analyze my options and probabilities, but not making a decision until they prove that they can think smarter than me. And so the game begins…

March 27, 2015

So you are ready to transform your organization? You want your organization to leapfrog the industry? You want to deliver above industry average growth? And do you know what are the most common mistakes that leaders and even very smart and experienced leaders make? The most common one is sticking with the usual way, the easy way and the proven way. There is no usual, easy and safe way if the company has not been doing well or satisfactorily underperforming. It is not just about making a good product anymore. Leaders need to ask how does one make a meaningful contribution to society with product?

Whenever I was tasked to help global enterprises to move the next level, the first thing I did was to stop them from doing things the same old way. It was never easy. You don’t go the next level without taking calculated risks, offending people and forcing people to do things differently. No one wants change despite whatever slogan or lip service about how people want change. And everyone wants breakthrough. There is no free lunch. No pain no gain.

I’ve been working with some of the best high performance global leaders for decades to breakthrough and manage large scale transformation. These are the five most common mistakes CEO and their executive team make and all can easily be avoided.

Failing to build organization energy and momentum. Organizational energy is the invisible force which an organization uses to purposefully put things in motion and drives positive behavior to advance the company’s mission and business objectives. The strength of organizational energy manifests in the extent to which a company has mobilized its emotional, cognitive, and behavioral potential in pursuit of its goals and it makes company resilient. Energy traps often endanger productivity and innovation. You must understand how to release them from being trapped. This is not a one off exercise and cannot be performed by consultants. It is the executive team’s job.

Failing to have a vision and to translate that into a compelling and relevant story. Company cannot develop a strategy without a vision. A vision is not just a statement that vaguely describes a company’s aspiration. It needs to be authentic and anchored on the industry’s competitive reality and illustrate how that future if realized will benefit the organization and allow it to prosper and thrive. The vision needs to show the shared common destiny and a path to get there. Vision without strategy is worst than not having a vision.

Failing to understand how to create value and understand the core value drivers. This is very common for management and it is critical for the top 10 and all C-2 executives to understand what are the critical drivers of value for the organization. These ideas need to be deeply embedded in day-to-day managerial decisions. In mapping out company’s processes and decision structures, the CTV (Critical to Value) notion needs to be reflected in CTQ (Critical to Quality), QTR (Critical to Revenue) and CTC (Critical to Culture). Three of the most important metrics to organizational health. Getting the right decisions on a few of these key CTV points, the company cannot be too wrong even though it may make many execution mistakes which sometimes is unavoidable.

Failing to assemble a super team fast. Any successful transformation needs to have the support of a small high performance super team. It takes time for an organizational to rebuild capability and even hiring new people from the outside takes time. It is crucial that a company needs to assemble a swat team for quick deployment to solve any problem. Any problems that are left alone will signify that new management’s inability to drive change. Problems need to be fixed fast. Otherwise there is no credibility. This super team should always be looking out for the organization. They are people who take decisive action to solve problems. They are people who understand the vision of the company. And they are the people with high analytical ability (typically with management consultants training) and ready to look at any problems even without the experience and domain knowledge.

Failing to get rid of bad organizational habits and the incompetents. Any underperforming organization has bad habits and usually a lot of them. Be it leadership habits or organizational habits embedded in the mental model of leadership or organizational design. The first thing leaders must do is to get rid of these old habits and dogmas and people that are underperforming. The bottom 10% of managers must go. Don’t waste time on them. What do we mean by being strategic?

At the end of the day, smart leaders must ask the following five questions:

Do you understand the critical drivers of value and what are critical to quality/competition/performance/culture? Are they part of your management team’s KPIs?

Are you doing enough to focus or leverage investments in your core value proposition and brand story? Are you cutting back or divesting fast enough on unnecessary and non-strategic investments?

Can you name the top 5-10 people in the organizations that could potentially become part of your super team? If you can’t name at least 5, you have a problem.

Where are you spending the time? Are you devoting enough attention to matters that are important to building strong energy and momentum?

Are you applying data-driven perspectives on all aspects of decision makings and what areas you are not feeling comfortable that data might not be right or not properly interpreted?

January 25, 2015

The US mobile industry has been in a clear state of duopoly with Verizon and AT&T occupying about 70-75% of both consumer and enterprise market. T-Mobile is attempting to disrupt the current status but the impact will not be sustainable although its Uncarrier attack effort is causing a lot of noise. To maintain competition and sustainability for all is a tricky balance and the key is to ensure it will not endanger the long-term ability for players reinvest in next generation networks. InterDigital, Qualcomm, Ericcson, and Samsung are actively involved in 5G wireless development and carriers need to be ready for the next upgrade cycle in 3 years.

Strategically speaking, an industry structure only becomes stable when three firms dominate a market or 90% of a market, when the market share ownership reaches a ratio of roughly 4:2:1. Simply, the number one provider has market share double that of number two and it doubles that of number three. With AT&T and Verizon roughly splitting the market, with Sprint and T-Mobile US struggling to grow their market share. This gridlock is not changing unless either AT&T or Verizon acquire Sprint or T-Mobile. Then there will be only two players left.

Duopoly may not be good idea for consumers. Although duopolies will eventually lower prices as much as perfect competition would. More than 270 million US customers (roughly 91.0% of the total US population) have the choice of three or more wireless providers, while 250 million (or 82.0%) can choose from among four wireless providers. For everyone, subscriber growth is slowing as we are near market saturation. This slowdown means acquisition costs will increase, as everyone is spending more to steal each others' customers. Spending to get new customers is not a way out. Carriers need to think how to reinvent their business models. That won't be possible unless they can a highly differentiated offering or customer experience. There are only two ways to do this. AT&T has been the most aggressive in expanding offering new services providing home security and automation services and providing cellular connections to non-smartphone devices or any IoT. It will pay off for them.

In the world of 4:2:1 market share structure, everyone is trying to invest on revenue growth through promoting churn. And the shifts in market share at similar prices for similar products depend upon the relative willingness or desperation of any one plater to invest at rates higher than the sum of market growth rates and the inflation rate. If markets are growing at1.5 %, and the inflation rate is 1.5%, than a leading contestant has to invest at rates greater than 3% annually. Any firm not willing to do so loses share.

If every player is willing to do so, then prices and margins will be pushed down until at least one or all stops investing. That is the case for Verizon and AT&T, and underpins the argument advanced by Sprint and T-Mobile that they cannot prosper in the long term unless they are allowed to merge. For Sprint, they are taking customer away from T-Mobile with trade-in program, as part of its "Uncarrier" program, T-Mobile will match trade-in pricing from other carriers. So, it's possible that the company could match whatever deal Sprint offers. And Sprint also has a matching program, so it goes on and on unitl one of them cannot afford it anymore.

Now if Google is starting its own cellular service (very likely) by buying capacity on T-Mobile and Sprint networks in the US. That would essentially create a disruptive scenario. Although for the last few years the competitive threat from the mobile virtual network operator (MVNO) looks to be subsiding; but by buying capacity on the networks of T-mobile and Sprint, the company will come into cellular business directly and it will offer Google phone and data plans to customers.

The question remains if Google’s intent is to create a limited market roll out or a full-scale national share grab. The word out there is Google is launching the service later this year. It will for sure be a very affordable package. And will Apple follow and buying capacity from T-Mobile and allow services for Apple devices? Apple’s entry will create the “The Prisoner’s Dilemma” for carriers. The carrier’s biggest fear is that if it says “no”, the business and growth would go to a competing carrier and yes they are fueling Apple’s market power. iPhone customers typically spend as much as twice or more the U.S. national average monthly wireless bill. So with Google entering the game and speculating Apple might do the same, the industry structure would definitely be destabilized. It is not reasonable to think Google might be able to take up to 2-3% share from AT&T and Verizon. The carriers won't be too happy. But the threat to carriers is small and mostly in the long term.

December 31, 2014

This marks the end of another year. A very busy and fruitful year for us. Personally I was on the road for more than 200 days and I need to take a break - perhaps 3 days. What about my New Year's resolution? I need to cut down on drive and email. I need to cut down on attending unprodcutive meetings. I need to find three people to mentor that they can become the best. I need to revisit places from my childhood that were memorable. I need to back up my hard drive (I am 96 days behind). I need to produce a mini feature film and shot entirely with my HTC phone. I need to cut down on my public speaking. I need to have more discipline on getting enough sleep.

For companies, it is time to think about growth. Every company wants growth and it is harder and harder to come by. Many companies are busy defending their shares and don't even the luxury to think growth. The most successful growth companies adopt at least four best practices:

Earn the rights for growth (business design/cash flow/business architecture etc.) and first focus on the core

Understand discontunuties and when is the next S-curve coming

Always think like a designer and think "customer value" first

Seeing the whole opportunity horizon and understand what it means

A common mistake is comanies jumping into some cool ideas that are simply just novelty and blindly believe that it is growth. The secret for growth is having a robust strategy. Here I will share a little of my secrets or not so secrets. Before that I want to make sure you know that easiest way to fail is by jumping into the future without figuring out a path to get there. You must have a plan. A plan that shows the whole opportunity horizon (built-on-robust foresight) and careful analysys of the industry economics.

There’s no magic solution to jump-starting growth. Growth is a strategy but also a mindset, it depends on how you see and shape your future by the action you take today. It takes more than a vision. It goes beyond just having the best product on this planet. Best product is no gurantee of success today. Often good enough products stand a better chance.

Remember, some used to say that strategy is about “Speed, Price, Quality – just pick two.” I’d tell them, even if you picked them all, it is still not enough. You need to pick, “Speed, Agility, Focus, Quality, Relevance and Price”. Not one, but all, if you are playing to win. Despite popular books and articles may be telling you to try and fail often and even to celebrate failure, I don’t buy those ideas at all - these are excuses for people taking uncalculated risks. Risks are not just unavoidable, but needs to be managed. It needs to provide a calculated return, and not just say take risks and fail fast. That’s for amateurs.

Companies need to understand the full spectrum of their opportunity horizon. And once it is understood, then it takes focus. You also cannot just react to the future because by sitting and waiting you will miss it. You also need to understand the opportunity horizons that you are looking at and how each horizon can be impacted by different degrees of uncertainty. It is more than just aspirations; it takes strategic thinking and a lot of sense-making. After all, corporate strategy is a game of sense-making and organizing for the future. Yet there are multiple futures and the trick is how do you decide to play just one or more than one. This is the part that is difficult for many as they see strategic planning as a mechanical and linear exercise.

First we need to look at the future through three different opportunity horizons then we have a pretty good picture on what is needed and how to act to positively impact a winning business strategy. When we look at successful companies that often playing in different horizons while not necessarily winning all, there are a lot of common factors. But that’s a much longer post to write and for today, let’s look at these opportunity horizons in three stages:

Opportunity Horizon 1: Redefine and reinvent the core. This is about rethinking the core and how to make it relevant. Or how to defend against low-cost high value competition etc. At the minimum it needs to stop market share erosion and if done properly it should be able to jumpstart growth. Reinventing the core requires going deep into the company's core belief system and to realign it with what's going on.

Opportunity Horizon 2: Extend core businesses into related adjacencies. Companies should expect 20-30% of their revenue to come from products or services that didn’t exist today and they should share some economic synergies with the core. Not only should it deliver additional revenue, it should enhance the core to strengthen its portfolio.

Opportunity Horizon 3: Initiate strategic transformation. At this stage, the company should in a good position (both strategically, organizationally and financially) to invest in full transformation, which includes shuffling of business units, assets and markets. Not every company can afford a transformation and they need to earn the right to do so. Many make the mistake of starting a transformation on day one when the company was not in any strategically or financially sound position to do so. Transforming without a stabilized core is a recipe for failure.

I have helped many large companies to orchestrate growth and it takes more than creating continuous alignment and killing projects that are sucking up resources. Killing projects that are not strategically aligned means signaling a changing behavior. A lot of energy is needed to deal with changing legacy behaviors — those that are expended toward the old strategy and not the new strategy. Companies often run on auto-pilot without even knowing it.

Implementing a growth strategy means one must balance activity between constant reinvention of existing current management practices and fostering behavioral change to prepare for the new. It means they should challenge managerial assumptions about how do get things done, what risks to take and the rationale behind them, and develop a list of desired or optimal behaviors that align with strategic goals, and have managers create a “let it go” list of legacy behaviors to eliminate. It is about getting rid of the old and creating new ones all at the same time. Perhaps that is the plan for the New Year.

November 15, 2014

The world is suddenly obsessed with smart technologies and this time around it seems unstoppable. Our everyday electrical and mechanical industrial object will now be occupied and ran by software and connected to the cloud. It also means each object (as small as some smoke detectors and as large as automobiles) will now be equipped with tons of sensors and can be able to adapt to different environment and individual needs.

It is essential that the next wave of industrial revolution will make us more efficient and empowered (and more human I hope), and data will be at the heart of this revolution. That's another big conversation. All the Nest, GoPro and Beats received multi-billion-dollar valuations through private investments or acquisitions and everyone is wondering why these hardware companies suddenly in such high demand. Because hardware and software are going through different commodity lifecycles and now software is becoming a commodity. They used to be difficult and expensive to develop and even to deploy, that that is changing. It is hard for software company to get into hardware much as hardware companies struggle to get into software. Hardware cannot be done by a few geeks in the basement, and involves massive R&D and specialists including megatronics engineers, electrical engineers, industrial designers, wireless engineers and usually takes a longer time to develop.

Software you can fix it with a download, and hardware you can’t. They are massive supply chain challenges when it comes to logistics and component supplies. The value of firms who can marry software and hardware will have a competitive advantage over their competitors. Essentially everything we use today will be fitted with some sensors, processors perhaps, and may be a screen and will recarnate and become of Internet of Things. For the last three decades, software engineering has advanced to a state that sophisticated codes can be embedded into machines. And the availability of cheap sensors and super powerful processors is powering this cycle of data revolution. All of a sudden, software, hardware and communications infrastructure are advancing us into a new era. Old world manufacturing + low cost computer processing + ubligious computing + cloud = smart new world and many cool products.

It sounds like the Apple story all over again, does it? The hardware and software integration capability of Apple, the ecosystem, the brand and user experience are now not only inspiring consumer gadgets company, not it’s influence is beyond its own industry. I know this is an overused story, but he Apple influence is still here, and perhaps it will be here for a long time even when the company stop creating great stuff one day. Microsoft ex-CEO Ballmer saw that coming in 2012 in a letter to shareholders. "It's important to recognize a fundamental shift under way in our business, we see ourselves as a devices and services company." Microsoft had the strategy right but couldn’t execute it fully with the exception of X-Box. Microsoft’s future revenue will still be coming in from software and it isn't going to change anytime soon. The transformation from software to hardware is harder that you think.

The idea that hardware is now the new software is pretty real. There is a business model implication here. These hardwares are mostly priced between $100 to $250 and they a gateway and great way to sell software. We are seeing a revival of hardware and this time, it is hardware first and software and then date on the cloud, it will bring new technological advances in cloud-powered hardware that boosts productivity, efficiency and manifests as beautifully designed objects that fit into our hands and homes.

September 01, 2014

As everything is moving faster and less predictable as it seems while organizations struggling to understand what it means and what options to take and how to land on the right decisions at the right time.The results often are inactions or delayed repsonses that cost companies.

Both senior and middle managers’ job include understanding, interpreting and communicating options for executive decisions, both as change agents and advocates. The toolkit that they have is very limited. Sensemaking is a vital skill and a new managerial discipline that is lacking across many organizations and functional units. How do we define sensemaking? It is how we try to make sense of the world and associated challenges so we can see and act in it. It also carries the concept of sufficiency, which is whether we know enough about the interrelationships and dynamics of the scenarios (events, places, people etc.) to make a contextually appropriate decision.

The two main academic thinkers in the field are Karl Weick and Brenda Dervin both of their work are very user readable. Weick I think tends to apply a more normative and organizational approach while Dervin looks at individuals and communication. Karl Weick emphases the importance of “mapping.” It is not enough to collect a lot of data, as we do these days and it is often overwhelming for managers, what is really important is that we need to take that complexity and map it in a simple way that can be communicated and shared so that a team or an organization can have a shared view of what the environment is like right now. Make complexity communicable but yet not making it overly simple.

I have seen people drawing simple circles or big maps with arrows and boxes but fail to communicate anything except the situation is complex and end up comfusing themselves as well as others. So beware of those fancy arrows and boxes that are useless. Good mapping provide managers with the benefit of seeing what’s going on and comparing that with their mental models. Good decisions making depends heavily on good sensemaking that includes important cues and signals so managers and senior executives can have a bigger capacity to make sense of uncertainty and emerging behavior. It has always been a core part of our strategic design thinking toolkit and there is no shortage of demand from clients to learn that skills.

May 27, 2013

The new M/I/S/C Bounce Back issue is out in newstand.This issue is packed with great articles about how companies should deal with adversity. It is one of the best issues ever.

For the last few years, magazines have made failure romantic, and start-ups love their failure stories. It’s true, there are some great stories out there: at the top of the list is Steve Jobs who was fired from the very company he founded. J.K. Rowling took Harry Potter to 12 publishers; all of them turned her down. Walt Disney filed for bankruptcy in his early twenties.

And there was Bernie Marcus who was the son of a poor Russian cabinetmaker from New Jersey who got fired from his job working at hardware store. With US $2 million in capital, Marcus and a partner went into business and opened a different format store with hangar-size, no-frills outlets, friendly service and a huge selection of products, they called it Home Depot. For Marcus failing was about character building and part of the journey to excellence.

These stories are both motivational and inspirational. Magazines from Fast Company to Harvard Business Review jumped on the bandwagon, selling the message it’s ok, even cool, to fail. Some people take this as a ticket to push bad ideas forward. Sometimes people carry failure as a badge of honor. There was a guy who wanted to join our company; his resume read ‘six times failure, a proud veteran.’ When I asked him whether he had any confidence that he will succeed the next time, he said no. It sounds like Vegas to me.
The organizations we design and operate are not agile enough to support smaller experiments and the bigger the company is, the harder it is to bring innovation to the market.

Companies are using the stage-gate approach, taken from product development, to the innovation process, which is a big mistake. They’re also applying the wrong metrics to measure innovation projects. But the fact is failure is a bad thing – if you can avoid it, avoid it. Instead of putting too much focus on those who ‘made it’, and their struggles and resilience, we should be really be focusing on teaching people how to avoid failure in the first place.

The problem is we should not encourage people to fail, but should not penalize them either. We should be encouraging them to take calculated risks. The danger I am seeing is when young people embrace failure in the wrong way. It almost seems like they’re trying to race through more failures to earn a badge, rather than trying the best they can to give the idea the best chance. This ‘failure movement’ is mostly supported by mediocre people who have few ideas and cannot execute. They continue to romanticize failure, to the extent that they start to expect it. We need to prepare for failure, but never expect it.
The failure movement is growing an irresponsible attitude toward risk-taking and Design Thinking.

Just because you fail many times, doesn’t mean that you have a better chance of emerging from challenges unscathed. It gives people an excuse to think harder and learn to apply Design Thinking principles to model scenarios to avoid or minimize failure. Most innovation can’t avoid failure. In fact failure is often by design, it is part of the process of iterative development and market learning. I don’t consider that failure.

Prototyping and learning from mistakes can ultimately lead to a higher chance of success, but it also de-risks project mistakes that usually come from the weaknesses of our human mind, such as hindsight bias. We should be teaching people how to deal with those biases.

The failure movement often falls prey to both of these biases. How many people can you name that went broke while attempting various business ventures, and are still broke? Can you write a list of these people more easily than a list of successful entrepreneurs who overcame immense obstacles to succeed?
I think we are giving ‘failure’ too much credit.

I can see why those stories sell, they’re comforting to read and somehow people feels closer to success. This is not the case. If you’ve failed 50 times it doesn’t mean you’re closer to making it. Let’s stop over-glorifying failure and avoid the pain. We know what it means when you have your fingers burnt once. The smartest way is to teach people to learn from Other People’s Failure (OPF). There is so much we can and should learn from it.

When I teach my strategy courses in master level programs, 80% of my teachings are around how companies fail and how to avoid it in the first place. For me, it’s called ‘strategy.’ There are so many free lessons our there, you don’t need to pay the price to feel the pain. Someone did it already. There is no need to romanticize failures, instead, we should learn how to best avoid failure and, in the worst-case scenarios, be prepared to bounce back from it. That’s what Design Thinking can do.

For the full story, pls see the June issue of M/I/S/C which is available in 26 countries and digital subscription is available through Zinio.

April 28, 2013

The media business is not seeing the light at the end of the tunnel yet. When people asked me about my magazine and the economics of that, they were saying why am I in publishing business. Well that is not my core business, just a hobby. It has been almost three years since the first publication of MISC and readership is growing nicely. We're now in 28 countries and we have have the digital version. I am getting a lot of positive feedback from readers from all over the world. Perhaps I should make the next issue the thickest one. This is the first cover that was shot in Milan. And the next cover will be shot in Shanghai.

The media business is certainly not easy with the never-ending technological disruptions we are experiencing and new behaviors keep evolving, we are nowhere near the end of it. The word social media makes no sense anymore as it is already main stream doesn’t matter how you look at it. Many traditional media types continue to cling to an old way of doing things, based largely on making minor adaptation to existing approaches and some are relentlessly experimenting with finding new revenue stream, largely still through advertising or sponsorship.

There aren’t many new opportunities for business model innovation if you take a strategic view, people are still thinking about advertising or sponsorship. Yahoo and Google are the same.
The hybrid model of readers’ empowerment and buttoned-down professional journalism is already fullyoptimized. Media executives are spending a lot of time thinking about the future of their industry and what it will look like in 2020.

Five years ago everyone is thinking about the online model and suddenly the tablets came and changed everything. And what’s next? Multiple screens device, new interactivity through voice, gestures and more external data sources, and glasses and watches etc. No one knows how content discovery and consumption model will evolve given the abundance of choice consumers have today. Neutrality is probably not the best interest for the media industry.

Media business is still suffering from an identity crisis, at least for another decade. The business model will not change, we will still end up paying for content through transactional, subscription or advertising models although there will be more flexibility on how we purchase them. With every person with a smart phone also has a video camera that can turn them into amateur journalists, news will become real-time and shows us different views of any event. And contextual bits will be consistently updated and events unfold. The Twitters of the world are the instant updates and these short bursts will create more noises than news value and readers need someone to break them down into manageable pieces.

Audience now lives in a multi-screens world. They can choose between raw news and organized news. The three key drivers of mobile disruption are hyper-local (geolocation), integration with home appliances and digital payments. The three together can put mobile at the center of an entirely new ecosystem. It is not merely another form factor. It is the biggest leap forward since writing first arrived about 7,000 years ago, which only impacted a tiny percentage of our population. Word of mouth was the only “information system” for most of humanity and now that will be turbo-charged by mobile as it unlocks an incredibly deep desire and capacity among us (humans) to share personally relevant information and feelings such as “I am waking up happy to a sunny morning” etc. These personal information is competing for attention with other news. And for me, I'd rather be reading what my friends are saying than the news. CNN is depressing.

March 24, 2013

For centuries we show our human spirit with
stories about our glories,hopes, desires and dreams for
a better future, one filled with modern machines that enable us to do things we long
to do from being invisible or traveling in flying cars or telepods (may be not telepods as
I always worried that something would go missing during the transmission). These stories
manifested itself in art, comics, fictions, movies and even science discoveries.

What was known as “futurism” is
the artistic movement that began in Italy and Russia that fast-forward us to the
future of the machine age into progressive state of mind. Futurism also
championed speed, technology, science, youth and also a lot of uncertainties. It's mantra was
that the answers to humankind’s problems lay in the future driven by technology – and not the past. The
main literary work of the movement was Filippo Tommaso Marinetti’s Futurist
Manifesto, published in 1909, and generally considered the beginning
of Futurism. I still enjoy reading that once in a while.

To invent the futures that we
desire, business and government leaders need to see things in new ways that
trigger their imagination to dream of new possibilities. Many of them are too "stuck" in the present. That’s when Design
Thinking comes into play. Design Thinking is not just about understanding people's needs. It can also
be used to bring people's imagination to propel us into the future. To see the future, Design Thinkers are equipped to
creating guidepost for developing strategic foresight. It is called Future Casting.

Future Casting is how people from the
past thought of the future. I remember visiting an exhibition in Prague where
artists from the former USSR were imagining how the future was like with its
futuristic art of space vehicles. Those Russian Futurists were fascinated with
the optimism, speed, and restlessness of modern machines and urban life. They were
actually performing Future Casting for the public.

I grew up watching Thunderbird and
Ultramen and as a boy and they were the only things that were available for me that I could
use as a guidepost for imagination. Funny enough, Ironman is like an unfinished prototype based on Ultraman design with the same battery problem. Ultraman highlighted the bottleneck of all technologies decades ago which is the battery. From iPhone to the latest Boeing 787 we still have not solved the battery problem.

We have always tried to look into the future and try to figure out
what comes next. Sometimes we create fictions, fantasies of what may come. Will
some of these fictions ultimately become real? There is no scientific evidence
for this, I suspect the percentage of fiction becomes real is way higher that
some thought our research based predictions that never made it close to become
real. These materials open a window into the past and in term a perspective of the
future… how the future should have been or their fears of how they were afraid it
would turn out.

The realities of tomorrow are the fictions of today. If you
want to have good strategic foresights, don’t hire designers or futurists. Hire
Sci-Fi writers! And pair them up with behavioral economists and anthropologists
and you will get good foresights.

The latest issue of MISC The Gadget Issue which has a special design feature Project 2020 about the future of sex, social and beauty. There is also the main feature How New Technologies With The Power To Evolve, Disolve, Disrupt and Democratie Industy which is fun to read. MISC is now in bookstores in 26 countries. And you can get it from Amazon too.

August 29, 2012

Here I am the first day in our new office - the building is officially named Idea Couture Place and I took the opporunity to talk about who we are and what are really good at to our people. There are still a lot of people that don't quite understand what a strategic innovation firm does and why it is not just another industrial design, strategy firm or creative house.

Now the move is over but it will take abother 2 months before we are really settled as many furnitures and equipment are still shipping from Italty, Belgium and China. I can't wait to see the fully finished office. For now, everyone is really happy. The roof top patio will look like a boutique hotel.

What exactly does Apple’s victory means for many other companies? The overwhelming patent infringement victory over Samsung is shaping the strategies of many and everyone is getting a wake-up call and now they need to revisit how they approach strategic innovation.

Apple’s CEO Tim Cook told his employees about how Apple values originality and innovation and pour their lives into making the best products on earth. They do this to delight their customers, not for competitors to flagrantly copy.

The result of this court case actually shapes the playing field of competition and the very nature of competitive strategy. Samsung, Motorola (Google), HTC, RIM, HP, Nokia, RIM, Microsoft, Xerox, Sony, Amazon and IBM . All have quivers full of patents and armies of retained patent lawyers ready to go to court to protect their interests and raise the barriers of entry for new players.

If you look at any new or old product categories, product and user experiences will become more andmore similar over time. Look around you and you realize a lot of cars looks the same and drive the same way. And over time, most phones, laptops or tablets will have similar designs and behaviors, just like TVs, cameras and typewriters. Switches and buttons whether they have rounded or rectangular corners or whatever shaped icons and the overall look and feel aren't likely the key points of differentiation. It has always been part of the commoditization process and companies will continue try to innovate with new ideas.

Every great innovation attracts copycats and it is hard to say whether we are promoting innovation by offering protection or deterring innovation by raising the barriers. There is no easy answer to this one.
What’s next? If you’re a small start-up you will have a hard time to make it big as once you gain some attention and market success, you will then discover that you may be infringing on patents even though you think you’re not.

Can anyone realistically come up with an idea that can past the patent test of Apple/Google(Motorola)/Cisco/Xeorx/RIM/Sony/Microsoft and Intellectual Ventures (the world's biggest patent troll) when everone is waiting to collect royalties for what you were pretty sure was an original idea or invention.

I can’t wait for a day when Apple is suing Google and Google is suing Nokia and HP is suing Apple and Samsung is suing HP and everyone is suing everyone – one hell of a party. In the end, it's more likely that these crazy entanglements will result in more cross-licensing agreements than to massive payouts – one big happy family and everyone is getting a check.

As for now, my phone hasn’t stop ringing as every company needs to “out-innovate” and wants Idea Couture to bring Design Thinking to them. Now no one is safe. Welcome to the crazy world.

February 05, 2012

What is "Strategic Transformation?" For some, it is the framework and process of altering the way in which an organisation does business using new technologies and processes. For others, it is the effort to develop a measured, goal-orientated response to marketplace events, or to improve performance by becoming more customer-centricity. But the most stratgic reason is the design and execution of an integrated, future-oriented, enterprise-wide program aimed at moving to an improved future and achieve stretch goals.

In the multitude of voices and noises, strategic and organizational paradoxes, CEOs and their executive team need to learn to navigate, transition and lead their organizations into a new future. Companies that failed to transform their organizations because they put too much emphasis on tools and technology and not enough on foresights, mental mindsets and leadership behaviors. Their leaders failed to develop the shared visions, values and beliefs that serve as foundation for dynamic culture and to engage all employees to co-create the new culture and to provide opportunities for them to initiate and participate in a shared destiny.

They need to start by identifying the specific beliefs and practices that need to be changed, challenge them to create new “experiences” that form those new belief. Convincing someone to change is hard and trying to convince and mobilize a large organization to change is an almost impossible task. But it is still possible. You just need to know where to start and where to push and pull.

There are many reasons why transformation efforts failed, because they over emphasis on the business processes redesign and not enough attention on the underlying human behavior. Strategic transformation is not just about helping people to rethink and reflect on the past and the present; it is also a way to prepare people for future unknowns.

The heart of any transformation lies in finding and embedding the “purpose” of the business and what they individually must do to accomplish that purpose, how to build trust, create networks and innovate. In the course of Idea Couture six years journey of helping large companies to transform, we determined that to create a new level of performance or jump back into a growth mode, a few things matter most. Most transformation will include building a culture of purposeful innovation and high performance. They consist of the following core components: mental mindsets, purpose and meanings, innovation practices, co-creation and measureable results.

When mental mindsets are anchored on a perspective of the future and the executives, board of directors, managers and employees are all aligned, they generate managerial actions that, in turn, lead to superior business performance. An exciting future state and here executives can leverage this to create the cultural momentum that is critical to ongoing innovation success. This cultural capital can help companies to deal with the ambiguities of technological disruptions and external market uncertainties and to direct their energy to adapt to fast changing competitive conditions. Facing increasing complexity applying a single-dimensional focus is absolutely fatal. And any attempt to emulate a successful strategy of your largest competitor is also fatal.

Transformation leaders understand the importance of using “strategic foresights” to help their companies maintain relevancy to the future and it is an ongoing attempt rather than a one-off exercise. Transformation leaders also understand the need to invest a disproportionate amount of time in bringing the organization together and function as one, not as departments or business units that ended-up sub-optimizing the business performance.

Executives in lower-performing organizations complain that they don't have time for the "soft stuff" and needed all the attention for a real business strategy. Yes we need a strategy on where and how we compete and what part of the value chain we can leverage and how to leverage from the economics of scale and scope. Executives are sometimes confused about managing conflicting strategies and they think they have to make difficult trade-offs. It is 100% possible to manage two conflicting strategies without keeping them apart. But to do so first required to develop a strong culture of trust and the ability to accommodate a new management mindset. That's why trasnformation is needed.

January 27, 2012

Apple's current biggest problem is not the next iPhone. It is the 100 billion dollar problem. Microsoft had been criticized for years for having too much cash and not putting them to use. They eventually started paying dividend starting 2003. It is not easy to deploy them in a way that creates the expecatation of return Apple's investors are expecting. I think they will eventually start paying dividend.

With Apple's war chest hitting $100 billion soon (currently around $98 billion but was originally estimated to be $60 billion) investors are asking the same question: What are you doing with the money or return it to shareholders? Putting that kind of money to work is not easy. It is over $100 in cash per share. $100 billion is roughly the same as California's 2012-2013 state budget and can literally buy a few countries or pay for a year of student loan for every college student in America.

Apple's core business is like printing money. Apple recorded a $16 billion increase in cash sequentially and there is no sign of slowing down with 66% rise in revenue with 36% rising expenses. That makes Apple the most valuable company at $300+ billion, which is close to the sum of the market cap of three computer giants: Microsoft ($200.2 billion), HP ($72.5 billion) and Dell ($29.2 billion).

Unfortunate big acquisitions don’t always work because of many reasons. And there is no magic formula for successful strategic transformation post acquisitions and most companies ended up underperforming post acquisitions. The problem is the inability to articulate the strategic logic of an acquisition and developing an organization and cultural integration plan.

At Idea Couture, we help acquirers in visualizing the future state and show how the pieces fit together in a very tangible (and credible) way. The future strategy is manifested in a well-articulated way showing its value creation potential. It is done through applied design thinking. Power Point cannot do the job. We bring the future state to the present to excite shareholders, employees and customers.

Apple’s history of acquisition has always been late stage start-ups that bring unique capabilities or technologies rather than revenue. With $100 billion you can literally buy up every early-stage start-up you want. Google has $44.5 billion for comparison.

Apple can use the money to purchase all patents over the years developed by Kodak, Research In Motion, Xerox Parc and Erickson and that can only account to a maximum 15-20% of the cash that they hold, but that patent portfolio allow them to sue anyone competing in their space in the next ten years.

Or Apple can use the money to buy up HP and Research In Motion and swiftly end Windows dominance in the enterprise market? Or buy Amazon and Netflix to reinvent and dominate content distribution.

Or Apple can just buy Sony? Funny Sony was looking at buying Apple when the company was at its worse shape in 1995. I still have a strategy deck I produced in 1996 about how Sony can leverage pieces of Apple and how the deal can create value for Sony. Now Apple could easily afford to buy Sony with its market value around $18 billion. If I am Apple’s CEO, that’s what I’ll do. Sony has been poorly managed from a corporate strategy level but does have great technologies, products, brand and talents. I would sell the studio business and concentrate on entertainment appliances. This deal can immediate further increase Apple's enterprise value. The integration part would be a nightmare.

Or just make it easy, Apple can acquire with cash HTC, Sony Ericksson, Samsung, Nokia, RIM, LG, Motorola, Nintendo which together has a combined value of roughly $93 billion. That's a lot of fun to figure out what you can do with these companies. And you still have $7 billion left to play with. Perhaps acquire New Balance for $400mm, Jobs probably would like that idea if he is still around. We miss him.

January 22, 2012

People think innovation is almost just about new ideas. Funny how many think Blue Ocean Strategy is a big wake-up call when all it does is communicating the very the basic and simple idea of strategic innovation – how not to compete with your competitors in the same game and instead create a new game.

A strategist has the choice between getting back into the fight with existing competitors or creating a new space when there is no competition AND no proven customer demand. This is the hardest part - "no proven customer demand" and let's see what the board has to say when you tell them that your strategy cannot be validated quantitatively. New game strategy is extremely difficult to make happen for a number of reasons:

It is hard to convince the board to bet on a market that has yet to exist

Successful founders CEOs are stuck seeing things with an old mental and underestimaing the threats

It is hard to change the minds of people who wanted (and have vested interest in) the old business to work and not willing to give up

It is hard to make the switch as it requires new mindset, capabilities and organization design

It is hard to be credible using the the current brand entering or creating the new market space

There is the question of how sustainable the new value logic from a customer and market perspective

Looking back at the history of industrial revolution or our information or technology revolution, red oceans vs. blue oceans or a better way to describe it is “today cash flow" vs. "future cash flow" or "defender vs. "attacker" etc. Avoiding competitions in the red oceans give rise to innovation opportunities that create new market space and could triggers a new round of industrial transformation. The author did not address the dynamics of the industry transformation.

Straegy is never that simple as red and blue oceans, organizations are increasingly inter-connected as they leverage brand, patent, talent, technology, knowledge, channels, products and services from each other often located in disparate parts of the world. These complicated inter-connections often prevent companies to reinvent themselves even the opportunity is obvious.

There are many hurdles and barriers for transformation including cognitive, resource, capabilities, motivation and political ones that prevent making a new game strategy implementable. Idea Couture Brand-driven Strategic Transformation goes beyond creating, communicating and maintaining a sense of identity and belonging for the employees, we bring foresights into the process and connect the align the brand with the business strategy and the strategic futures.

The brand is used like a savings account for emotional equity while we develop an engaging and energizing feeling of commitment to the organization by creating and co-creating a shared destiny; this is where it creates the highest impact. Conventional visioning and mission writing exercises often fall short to drive transformation. The idea is to get executives and senior managers in front line employees to move beyond empty, slogan-driven communications, which are more likely to lead to detached cynicism than to engagement, and to help them develop a clear personal commitment to an organizational purpose that will reflect in all aspect of managerial actions.

Business transformation is the execution of an integrated, corporate-wide program aimed at aligning the present and future as well as the organization, strategy and brand, it ensures alignment and internal consistency by reshaping the leadership, strategy, finances, organization and operations of businesses as a whole. It is not a Power Point, it is the energy flow of an oranization.